The state of the world financial markets has me mixed between elation and panic. I knew the market was in for a correction - many people did, but it was a matter of when and how much. I don’t think anyone could have predicted the global meltdown that we’re seeing with the market that we’ve seen in the past two weeks.
While I am glad for a market correction and recognize this as a sort of “coming out in the wash” for all the greed and corruption we’ve seen in the past dozen years coming off Wall Street, there is a small part of me that really gets doom and gloomy over what this means for our economy and the future of the US. It’s clearly going to affect the presidential election outcome (not necessarily to my liking) and for the conspiracy theorists out there who think this is the beginning of global monetization (the Amero as a new currency with Canada, US, and Mexico), it definitely is signaling something, but I’m not a real economist, so I can’t tell you what. (For that matter, I don’t think the real economists know either right now!!!)
What I do know is I believe there is going to be a dip in food prices that should send you running the store to stock up, and here’s why.
The price of oil fell very sharply which signals a weak demand which means that we’re looking at less economic output in the coming fiscal quarters. The result is that the decline of output means businesses are going to see less sales as consumers and businesses are hesitant to part with their money. Particularly in the business to business sector, this is going to really ring true. Think about the guy who sells farm equipment. If the farmers aren’t buying cause they have limited access to credit, there’s going to be some price-dropping across every part of the agricultural supply chain, including raw ingredients.
And on the consumer side of things, it means General Mills and Kellogg are going to duke it out for market share. Where I’m seeing this first is in small grocery stores that are trying to hold it together. Loss leaders are steep this week. One small store in my area has milk 2 for $3 - $1.50 a gallon. It’s been awhile since I’ve seen that price. Of course, loss leaders are really about getting people through the door to buy other goods, but that steep of loss leaders implies to me that we’re already starting to see pressure in the grocery market to be competitive. The big brands, who’ve been slammed with the messaging from the media to “buy generics” are ramping up marketing spends while cutting some prices. Even national chains like Kroger, Safeway, and Albertsons are changing their marketing tunes, and everything is “extreme buy” type sales. It’s the return of the true 10 for $10 sales. This week, orange juice 1/2 gallons at Fred Meyer, a local Kroger chain, are $1 each. That’s “extreme” compared to what it’s been in the past summer of high food price misery for consumers.
However, I don’t expect this to be the trend for long. It’s a dip in my opinion. We’re going to see some real competition for market share and tactics stores are going to use to get people through the door, particularly mass retail merchants like Kmart who offered double coupons last week and put a $5 off $50 coupon in the paper this week.
Once the dust settles and the losers have disappeared - either some brands changing hands or a few local stores closing, the decreased competition and decreased supply chain as farms and smaller food manufacturers are pushed out with lack of capital and declining sales, then we’ll see another spike in prices.
Again, all speculative, and all my opinion, but my opinions about the food industry have been pretty dead-on for several years now, so I feel pretty confident in passing on this opinion for you to do with as you see fit for your family. For me, it means I am going to take advantage of all the offers and sales I think are coming down the pipe in an effort to offset the money we’ve lost in the market this week. And in treating my own personal finances like business finances, if I can conserve my cash and accumulate some grocery inventory at the best possible prices, we’ll weather the storm in the long run.
It’s not exactly a free lunch, but close.
